Retirement Pension

Germany's once generous and comprehensive social welfare system is under pressure with a funding crisis resulting in part from the graying of the nation's population. This is forcing the government to undertake major and unpopular reforms. The German government has moved to encourage workers to supplement their state pensions with private retirement schemes by offering tax breaks. This topic is colloquially dubbed as “Riester-Rente”, following the (federal) Secretary of Labor, Walter Riester. A paralell system is the "Rürup-Rente".

I have worked in different countries. At what age, can I have a claim on old-age pension.

There is no world-wide uniform retirement age. Old-age institutions grants pensions in accordance with domestic law. Therefore, it is possible that you can be “of age” for retirement in one country but not in another one. To avoid disadvantages, consult your insurance fund at home or where you have worked so far. Don’t forget to ask when you latest have to apply for old-age pension.

If I work in Germany for less than 5 years and go back home, what happens to my premiums for the statutory retirement pension?

You are right about the sixty-month threshold. After accumulating that many months of payments in any period of time, you have a claim to German social security. If you spend less than five years in Germany and make no claim to social security here, you can apply for a refund after you leave.      

And what happens when I leave after 10 years?

Having paid premiums to German pension authorities for more than sixty months, you are entitled to retirement pension. You may get the German pension on top of your national one, or you may get your national pension based on the time you spent at home and in Germany. If you can collect a German pension in addition to your national one, or if you have time credited to your domestic social security, may depend on certain facts. If your home country is a member of the EU or has signed an agreement with Germany on mutual recognition of time for social security benefits, then you will not receive a separate German pension. “German time” will be added to your domestic pension.

What is this Riester-Rente all about?

It is simple. Because the labor force in Germany is declining and the numbers of elderly are increasing, the statutory old-age pension cannot provide a real sustainable income for all pensioners in the future. You have to set up your own pension scheme. As an enhancement for this, you will receive tax rebates.    

Who is entitled to a Riester-Rente?

Anybody, who is employed, is entitled to a Riester-Rente. If you are self-employed and married to an employee then you also qualify – though only indirectly. In other words, if you are self-employed you have to take care of your old-age pension all by yourself.

Aren't there any catches?

Yes and no. When you are not fully subject to German taxation anymore then you will loose your eligibility. But not only that, you will have to return all public benefits. This will be the case, if you leave Germany.

Gosh, all these employees get their privileges, and as a self-employed I leave empty-handed. Can this be?

No, this is not really the case. As a self-employed, you are directly entitled to a similar program called "Rürup-Rente". When you save for later days in a certified program, your premiums will be tax deductible as personal expenses. Again you, as a self-employed, you will be privileged because even when you leave the country, you will not have to return any tax benefits.

What will this cost me?

This will cost you a minimum portion of your yearly income (including any bonuses) according following table.


Portion of yearly income
And what do I get from it?

Whoever pays the full savings rate shall receive the following:

each having their own Riester-contract
Per each child receiving child’s money
€ 76
€ 152
€ 92
€ 114
€ 228
€ 138
€ 154
€ 308
€ 158 or € 300*

* = for each child born starting January 1. 2008.

For further details contact your insurance broker!

Will Riester-Rente suffice in my old days?

No! Absolutely not! Do not rely exclusively on Riester and other statutory pension plans! Don't forget that your company might have sufficient pension schemes. Ask your employer about this. If he can't supply you with any plan than you can ask that he opens a direct insurance for you.

Tagged under: Taxes Private,